Before renting out a parent's house, settle six questions. Who has authority to sign a lease? Does the rent cover mortgage, taxes, insurance, repairs and empty months? Which insurance applies (usually a landlord or rental dwelling policy)? How are rental income and a later sale taxed? Does renting affect Medicaid? And who will manage tenants? A tax professional and an elder law attorney should weigh in before a lease is signed.
Key facts
- Triple-I says that leasing a home to one tenant or family for a longer period, such as six months or a year, will likely require a landlord or rental dwelling policy. (Triple-I, n.d.)
- Triple-I says landlord policies generally cost about 25% more than a standard homeowners policy. (Triple-I, n.d.)
- IRS Publication 527 says rental income generally must be included in gross income. (IRS, 2025)
- The Fair Housing Act prohibits discrimination by landlords because of race or color, religion, sex, national origin, familial status or disability, according to the Department of Justice. (DOJ, n.d.)
- For most housing built before 1978, the EPA says landlords must give tenants information about known lead-based paint and hazards before the lease is signed. (EPA, n.d.)
Your mom is settled in assisted living and the house is empty. Selling feels final, and a tenant could cover the costs, maybe even help pay for her care. Renting can work. It also turns your family into a landlord, often from another state, with obligations to tenants, the insurer and the IRS. This post lays out the questions to answer first, in the order they tend to decide things.
How renting, selling and holding compare
| Rent it out | Sell it | Hold it empty | |
|---|---|---|---|
| Cash for care | Monthly, after costs | A lump sum | None, and costs continue |
| Work for the family | Ongoing: tenants, repairs, records | A few intense months | Checks, maintenance, insurance |
| Insurance | Landlord or rental dwelling policy | Coverage until closing | Vacancy rules apply |
| Taxes | Rental income reported, and a later sale may be affected | Home sale rules apply | Property tax continues |
| Medicaid | Ask an attorney | Ask an attorney | Ask an attorney |
| Keeps the option to return | Only after a lease ends | No | Yes |
The sale route is covered in selling a parent's house while they're in assisted living. Holding it empty has its own insurance problems, covered in insurance for a parent's empty house.
Who can sign a lease, and whose money is it?
Unless the house is owned some other way, the landlord is your parent. If your parent can't sign, someone needs legal authority: an agent under a durable power of attorney that covers real estate and leasing, a trustee, or a guardian. The CFPB's guide for agents under a power of attorney says your authority is strictly limited to what the document and state law allow, and lists collecting rent among the tasks an agent may handle if the document allows it.
The rent belongs to your parent. The same guide says to keep your parent's money separate from yours, never deposit it into your own account, and keep detailed records of everything received and spent. In practice, that means a lease in your parent's name (signed by you as agent if that's your role), rent paid into your parent's account, and repairs paid from it.
Asking your parent how they feel about it
Your parent may have strong feelings about strangers living in their home. Ask before you plan: "We've been thinking about renting the house instead of selling it, so it keeps paying for itself and stays in the family. How would you feel about a tenant living there? Is there anything you'd want us to keep or protect?" Their answer may settle the question.
Does the math work?
A rental makes sense only if the rent covers the costs with room to spare. Get a rent estimate from a local property manager or real estate agent, then subtract every cost you can name:
- Mortgage payment, if any.
- Property tax and any HOA dues.
- Landlord insurance. Triple-I says landlord policies generally cost about 25% more than a standard homeowners policy.
- Repairs and maintenance, including the ones that come up before the first tenant.
- Empty months between tenants.
- Property management fees, if you hire a manager.
- Utilities or services you agree to include.
- Your own travel if something goes wrong.
If the result is thin, a single furnace replacement can wipe out a year of net rent. Put the numbers next to what your parent's care costs each month and see whether renting helps pay for it.
Which insurance covers a rented house?
Call the insurer before a tenant moves in. Triple-I explains that a standard homeowners policy may not cover losses while the home is rented out, and that leasing to one tenant or family for a longer period, such as six months or a year, will likely require a landlord or rental dwelling policy. According to Triple-I, those policies cover the structure against covered perils, include liability coverage if a tenant or guest is hurt, and often cover lost rent while the house is being repaired after a covered loss. The tenant's own belongings are not covered, which is why many landlords require tenants to carry renters insurance.
Tax and Medicaid questions for the professionals
Ask the professionals about each of these before assuming an answer:
- How is rental income reported? IRS Publication 527 says rental income generally must be included in gross income, and explains how to handle expenses and depreciation.
- What about the year the house becomes a rental? Publication 527 says that if a home is changed to rental use during the year, expenses like taxes and insurance must be divided between personal and rental use.
- What happens to the home sale exclusion if we sell later? IRS Publication 523 explains that periods when a home isn't used as a main residence can affect how much gain can be excluded, with exceptions. Ask how renting first would change a future sale.
- What about renting to a relative? Publication 527 has specific rules for property rented at less than a fair rental price.
- Medicaid. If Medicaid may pay for care now or later, how a rented house and its income are treated depends on the state. The CFPB guide advises getting legal advice before decisions that may affect Medicaid eligibility. See questions to ask an elder law attorney.
Landlord duties you take on
- Fair housing. The Fair Housing Act prohibits discrimination by landlords because of race or color, religion, sex, national origin, familial status or disability, according to the Department of Justice. Your screening criteria and ads must follow it, along with any state and local rules.
- Lead paint disclosure. For most housing built before 1978, the EPA says landlords must give tenants information about known lead-based paint and hazards before the lease is signed. Some exceptions apply, such as leases of 100 days or less.
- State and local landlord-tenant law. Security deposits, repair duties, notice periods and eviction rules differ by state and city. Some cities also require rental registration or inspections. Ask a local property manager or attorney what applies.
- Records. Keep every rent payment, repair and receipt in one place, for taxes and for your family.
Managing a rental from far away
If you live out of state, a property manager usually keeps a rental from turning into a second job. Interview two or three and ask each:
- What exactly is included in your fee, and what costs extra (leasing, renewals, repairs, evictions)?
- How do you screen tenants, and how do you make sure screening follows fair housing law?
- What repair amount can you approve without calling us?
- How and when do you send rent and statements? Can rent go straight to my parent's account?
- Who handles an emergency at 2 a.m.?
- Can you give us references from owners who live out of state?
Even with a manager, someone in the family owns the records and the monthly check-in. Fold it into your parent's other finances, using the routine in managing a parent's bills from far away.
Keep the house decision in the same plan as the move
Parent Move Plan puts the move on real dates counted back from move-in day. The plan also has a shared costs log for repairs and fees, five house clearing tabs for getting the house rent-ready, and a weekly check-in agenda so siblings see the same numbers.
Get your first 3 days freeFrequently asked questions
Is it better to rent or sell a parent's house when they go into assisted living?
There is no general answer. Renting can bring monthly income and keep the house in the family, but it adds landlord work, repair risk and insurance and tax questions. Selling turns the house into cash that can pay for care. The right choice depends on your parent's finances, taxes, any Medicaid plans and who will manage a rental, so bring the question to a tax professional and an elder law attorney.
Does homeowners insurance cover a house that is rented out?
Often not fully. Triple-I says a standard homeowners policy may not cover losses while the home is rented, and that leasing to a tenant for six months or a year will likely require a landlord or rental dwelling policy. Call the insurer before a tenant moves in.
Do you have to report rental income from a parent's house?
In most cases, yes. IRS Publication 527 says rental income must generally be included in gross income, and it has special rules when a home is converted to a rental during the year or rented to someone for less than a fair rental price. The rental income belongs to the owner, usually your parent, so ask their tax professional how to report it.
Can I rent my parent's house to a family member?
You can, but treat it as a real rental: a written lease, rent paid into your parent's account, and records. IRS Publication 527 has specific rules when a property is rented at less than a fair rental price, which can change how expenses are treated. Ask a tax professional before setting a family discount.
Sources
- Triple-I: Coverage for renting out your home (accessed Sept 2026)
- IRS: Publication 527 (2025), Residential Rental Property (accessed Sept 2026)
- IRS: Publication 523 (2025), Selling Your Home (accessed Sept 2026)
- U.S. Department of Justice: The Fair Housing Act (accessed Sept 2026)
- EPA: Real Estate Disclosures about Potential Lead Hazards (accessed Sept 2026)
- Consumer Financial Protection Bureau: Managing Someone Else's Money, Help for agents under a durable power of attorney (Florida edition) (accessed Sept 2026)